What is Residential Status for determining income tax liability ?
Residential status refers to a person’s classification under Indian tax law based on how long they’ve stayed in India during a financial year. It’s not the same as citizenship—even a foreign national can be considered a resident for tax purposes, and an Indian citizen may be classified as a non-resident.
How Is It Determined?
Under Section 6 of the Income Tax Act 1961, individuals are categorized into:
- Resident and Ordinarily Resident (ROR)
- Resident but Not Ordinarily Resident (RNOR)
- Non-Resident (NR)
To determine this, the law looks at:
- Number of days stayed in India during the financial year (April 1 to March 31)
- Stay in previous years (for RNOR/ROR classification)
- Basic conditions to determine residential status :
| Category | Criteria |
| Resident | Stayed ≥182 days in India during the year OR ≥60 days in the year AND ≥365 days in the past 4 years |
| RNOR | Resident but stayed <730 days in past 7 years OR was NR in 9 out of last 10 years |
| NR | Does not meet the above conditions |
How It Affects Tax Liability
Residential status determines how much of the income is taxable in India:
| Status | Taxable Income in India |
| ROR | Global income (India + abroad) |
| RNOR | Income earned or received in India + income from business/profession controlled from India |
| NR | Only income earned or received in India |
Example:
If an Indian citizen working abroad and spend less than 182 days in India, he/she may be classified as a Non-Resident, and only his/her Indian income will be taxed.